Sudden UK Production Slump 'Not Sign Recovery Losing Momentum'

Production in the UK economy slumped between April and May after a sharp contraction in manufacturing output, raising eyebrows about the solidifying recovery.

The Office for National Statistics (ONS) said its Index of Production fell by 0.7% month-on-month, driven largely by a 1.3% drop in manufacturing.

But over the year the picture is much healthier. Total production output, which also includes mining and quarrying, was up 2.3% in May 2014 compared with the same month a year before. Manufacturing was 3.7% higher.

"We do not regard these data as a sign that the economy's rapid expansion is losing momentum," said Michael Saunders, UK economist at Citi, citing a series of positive industry data, the volatility of manufacturing, and that official figures are often subject to revision.

A booming manufacturing sector has been one of the most positive narratives in the recovery. Survey data has consistently shown that output and employment are improving strongly, making manufacturing one of the main drivers of GDP growth.

The industry has been given support from the government to help keep a lid on energy costs and get access to affordable finance from the banks.

And there has been government support for foreign importers of British goods, helping them to secure the finance they need and so boosting UK trade.

Chancellor George Osborne is relying on the improving health of the manufacturing sector to help him meet his ambition of rebalancing the economy away from its reliance on household consumption and towards business investment and trade.